It’s every lawyer’s nightmare: a client takes you to court accusing you of legal malpractice. You’re facing perhaps hundreds of hours devoted to your case and the significant cost of hiring a malpractice attorney to defend you. In the end, if the courts side with the plaintiff, you may also face a sizeable settlement. But it’s okay, your insurance has you covered and you can put the episode behind you and move on. Or so you think, until a few months down the line, your policy comes due for renewal. Your new quote is thousands of dollars more than you were expecting. The family vacation just got cancelled, and cancelled forever, because unlike the settlement, that bill comes around every year.

“I Can’t Afford $35,000 A Year for Malpractice Insurance!”

This is not just a hypothetical situation. We recently had a client (we’ll call him Jim) come to us who had two claims against him. Jim has a solo practice in family law in Southern California. He had settled one claim for a few thousand dollars and another for $120,000. The larger claim had closed three years previously, but he had never shopped his insurance. His policy was set to renew on March 5, 2013 at the staggering cost of $35,000. This is for a solo attorney in family law! Facing this staggering cost, Jim asked his secretary to call around and she came to us.

At first, it wasn’t promising. All the standard markets denied coverage. We eventually went to Loyd’s of London and convinced the underwriter to work with Jim. Most underwriters work off the barest details and it’s easy to just stamp denied on the papers. We knew there was more to Jim’s case than met the eye. The plaintiff in the big case had leveled other charges against Jim that the judge dismissed with prejudice. This was a personal vendetta as much as anything. We had Jim write a narrative 3–4 paragraphs long for each case explaining to the underwriter the full circumstances. This allowed the underwriter to understand the true risks Jim faced in his practice. With a better understanding of the situation, the underwriter wrote Jim a policy. The price? Nineteen thousand dollars, a bit more than half of the original quote. Sure, $19,000 is not exactly free, but this represents a $16,000 savings over the quote from his original insurer. That’s a heck of a family vacation!

That original quote is what we like to call a “go away” quote. It is an insurer’s way of saying “We don’t really want your business, but if you’re crazy enough to meet our price, we’ll take your money.” The price is exorbitant by design. It’s intended to make you go away.

Shopping for Malpractice Insurance When You’ve Had Claims Against You

If you’ve had a claim, some special considerations arise when you’re looking to renew your professional liability coverage. Mostly, your broker should handle the details, but there are a few things you can do as a client to stack the deck in your favor.

• Do not let your policy lapse. This is crucial. If you do nothing else, make sure that you maintain continuous coverage. We’re planning to write about “claims made” coverage in the near future and explain why this is so important, but for now trust us on this. Letting your policy lapse opens you up to major exposure and makes it much harder to write you a policy in the future.
• Start early. As you can see from Jim’s story, it’s not always as simple as calling an insurer and getting a policy. If Jim had waited until the last minute, he would have had no choice but to pay that $35,000 bill on March 5. Getting the absolute best price may require a fair bit of time and effort from your broker, so the more time we have, the better chance we have of finding the best coverage out there.
• Contact a broker that specializes in legal malpractice insurance. This one isn’t always obvious. Some brokers may offer legal malpractice insurance, but they may only work with a couple of the biggest insurers. You need a broker who has a large portfolio of insurers he can choose from, who understands the markets and who has established relationships with underwriters.
• Make sure your broker has written policies for lawyers with malpractice claims against them. Again, just because a broker offers legal malpractice insurance doesn’t mean he has dealt with special circumstances like lawyers who have had claims against them. The more difficult your policy, the more crucial this is.
• Settle your claims as early as possible. There are challenges to writing a policy when you have settled claims against you. Writing a policy when you have pending claims against you is a monumental challenge. If there’s a huge sum on the table, you may have no choice, but if you’re fighting over a small sum and looking at a looming insurance renewal, you may be better served to settle the claim and close it out if possible before shopping your policy. Of course, that’s your decision and must be based on the facts of the case. We’re only trying to suggest that you not leave the liability insurance costs out of the equation when making your settlement decision.

Let Us Help You

Over the course of our two decades of specializing in legal liability insurance, Paul and I have seen scenarios like Jim’s many times. In the vast majority of cases, our strong knowledge of the insurance landscape has enabled us to write policies at major savings to our clients. If you’re finding yourself facing high insurance costs because of malpractice claims against you, let us take a look at your situation and see if we can help you. Please, give us a call at (877)-856-9231 or fill out our online quote form.